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Stunned and out of luck, he is possibly too old to catch up on his pension by continuing to work. Sound familiar? Even if it doesn?t, one case of payroll fraud like this, is one case too many.

Payroll fraud can be perpetrated in a number of ways, in a variety of forms, including pyramiding, employee leasing, paying employees in cash, filing false payroll tax returns or simply ignoring the filing process.

Pyramiding of employment taxes and pensions is a fraudulent practice where a business withholds monies from its employees but intentionally fails to remit them to the government tax or pension commission/authority. Under current domestic law, even with huge public trust payroll monies owed, a company can file for bankruptcy to discharge all liabilities accrued. Then, the same owner makes a fresh start with a new business under a different name and starts the same pattern scheme all over again. In the US, for instance, payroll and pension cash liabilities are never discharged in bankruptcy. That burden may revert to a pension insurer, but it is not excused.

Pleading ignorance of the payroll and pension filing system is not a valid excuse, although government revenue agencies may allow some leniency for some innocent or inadvertent non-compliance. However, blatant and consistent misfilings by some businesses should raise ?red flags? triggering a monitoring process to aggressively collect those late payments.

Many countries? Government Revenue Collection Agencies have harnessed the power of electronics for efficient collection of mandatory payments. And they are very, very good at tracking employers: employers falling one month behind are immediately assessed large fines; two or more months behind, the Agency moves to freeze business and personal accounts and garnish assets. In some cases if the CEO or Treasurer cannot be found, will be approached for cash restitution regardless of whether they actually own the company.

In the United States, during Fiscal Years 1998, 1999, and 2000, nearly 86 percent of the persons convicted of evading employment taxes were sentenced to an average of 17 months in prison and ordered to make restitution to the government for the taxes evaded (plus interest and penalties.) Canadian Revenue authorities and the UK also use prison terms, fines and confiscation of property orders. Persons who deliberately evade these responsibilities cause ethical employers to pay more than their fair share, as government is ultimately forced to raise levies on all businesses.

The ?by the book? employer is also disadvantaged as the non-paying-tax employer can afford to undercut bid jobs because his/her overhead is lower, due in part to illegally obtained interest free loans (from employees) and a readily available cash float.

It follows that those who short the payroll system also avoid other obligations: inadequate or no employee health insurance; little or no workers compensation and general liability insurance; property tax defaults; skimping on materials; poor repair jobs using inferior product components; mediocre or poor professional service; inadequate or no job safety measures, and so on.

Cheating knows no economic, social, ethnic or cultural boundaries. It is disheartening to see this kind of theft perpetrated on honest, everyday working people. They are the real losers; many of them will never earn the salary their employers command, nor live their lifestyle. Some individuals in retirement may quickly exhaust resources and suffer the indignity of needing financial assistance programs just to survive.

Employers of integrity should demand assurance that our government payroll and pension system be equitable and that tax evaders will be prosecuted appropriately. Indeed, honest employers should be recognised as full contributors to society?s well being, because they have done the right thing.

Employees, your responsibility is to know where your payroll tax and pensions benefits are each and every month. If numbers don?t add up, you need to know why. It will not matter whether the ultimate fine to your employer is the mere cost of an expensive dinner for two ($250). Once the cash is gone, it is gone.

Even when the business faces the full weight of legal scrutiny, legitimate employers and employees alike receive the ultimate indignity of having to pay again for the legal costs of the perpetrator?s prosecution and subsequent incarceration.

Aren?t all working people worth much more than that?

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